Infrastructure Sector update : NHAI awarding remains muted FY26YTD; Infra budget capex pegged to rise ~12% for FY27 by Motilal Oswal Financial Services
* The pace of project awarding by NHAI has remained subdued during FY26. As of midJan’26, only ~1,135?km has been awarded against the annual target of 6,376km. The slow awarding is attributed to a mix of factors, including higher focus on land acquisition before awarding, procedural delays, and a temporary shift in focus towards project execution rather than new awards. The overall muted awarding has impacted order inflows for several road construction companies. However, companies now expect government awarding activity to gain traction and remain positive about a revival in the order book going forward.
* On the construction front, NHAI has built 3,551km of national highways from Apr’25 to mid-Jan’26, against the full-year target of ~6,000km. The focus remains on ramping up execution to meet the annual targets. NHAI exceeded its highway construction target of 5,150km and built 5,614km in FY25.
* Union Budget 2026-27 infrastructure capex is set to rise ~12% in FY27 over FY26 (RE), with road sector allocation rising 8% to INR2.94t. Key measures include a new infrastructure risk guarantee fund, accelerated CPSE asset monetization via REITs/InvITs, INR100b for container manufacturing, new DFC connectivity from Dankuni to Surat, a coastal cargo push to raise modal share to 12% by 2047, and the operationalization of 20 National Waterways over the next five years.
* FASTag toll collections improved ~16% YoY in volume terms and ~12% YoY in value terms during Oct’25-Jan’26, supporting asset monetization plans.
* For FY26, NHAI has set an asset monetization target of INR300b (vs INR287b achieved in FY25). The monetization will primarily be routed through the Toll-Operate-Transfer (ToT) model and Infrastructure Investment Trusts (InvITs). To support this goal, NHAI has identified a pool of 24 assets spanning 1,472km for monetization in FY26. The proceeds will be deployed for highway development, debt repayment, and generating returns for investors. NHAI recently awarded the 18th ToT bundle to IRB Infrastructure Trust for INR30.9b.
* The Dedicated Freight Corridor Corporation of India (DFCCIL) has commissioned 2,741km of the planned 2,843km for both Eastern and Western Dedicated Freight Corridors (DFCs). The completion is expected by Mar’26
FASTag toll collections showing consistent improvement
FASTag toll collection volumes improved ~16% YoY over Oct’25-Jan’26, while the collection value increased ~12% YoY. During FY25, FASTag toll collections increased 13% YoY. Higher toll collections play a crucial role in expediting the monetization process of road assets by the Ministry. Additionally, toll collections benefit companies that aim to monetize their existing toll assets
Declining input prices to support margins for contractors
Steel and aluminum prices have decreased ~35% and ~12%, respectively, from their highs in Apr’22. Cement prices have decreased ~16% from their highs in Oct’23. With higher construction activities and stability in commodity prices, road contractors anticipate some improvement in profitability and margins in FY26.
Players with robust order books, strong balance sheets, and diversified operations well placed Although there has been a slowdown in project awarding in FY24, FY25, and 9MFY26, the tender pipeline is currently robust. Entities with significant order backlogs, strong financial standings, and involvement across diverse sectors are well-positioned to benefit.
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